Management from Forward Air said the company remains focused on the integration of Omni Logistics and ironing out a marketing strategy that includes its legacy expedited less-than-truckload services with its acquired air and ocean freight forwarding business. During opening comments on a Monday evening call, management told analysts it would not comment on “rumors or speculation” that the company was up for sale following its publicly panned merger with Omni.
When the deal was announced in August 2023, some shareholders were miffed they were cut out of a voting process and attempted to block the transaction in court. Since the January close, which added significant debt to Forward’s balance sheet, activists have been calling for Forward’s board to explore strategic alternatives including a sale of the company. The group is hoping that private ownership can fix Forward’s balance sheet and allow the company to formulate a marketing strategy away from public scrutiny.
Forward (NASDAQ: FWRD) reported a net loss of $2.62 per share for the third quarter. However, the result included a goodwill impairment charge as the acquired assets no longer garner the premium paid for them. Other transaction-related expenses were included as well.
Adjusted earnings before interest, taxes, depreciation and amortization of $77 million came in $4.3 million lower than in the second quarter, prompting the company to cut full-year 2024 adjusted EBITDA guidance to $300 million to $310 million (from $310 million to $325 million).
Management did say an initiative to achieve roughly $75 million in deal synergies by the first quarter of next year was slightly ahead of plan.
The company pointed to inferior pricing on class-based less-than-truckload shipments as a primary reason for the unfavorable result. It said the company’s prior strategy “focused more on volume than profitability,” leaving many of its shipments underpriced relative to the service provided to move them.
That strategy was implemented before the new regime took over.
The expedited segment, which includes LTL operations, reported revenue of $285 million, which was 2.1% higher year over year. Tonnage per day increased 2.4%, but revenue per hundredweight, or yield, was down 0.5% excluding fuel surcharges (1.2% lower than in the second quarter). Forward said it will continue to offer class-based LTL services but not at the unfavorable yields previously allowed.
The unit recorded a 6.8% operating margin, 490 basis points worse y/y. Most cost buckets were up as a percentage of revenue, with purchased transportation expense 260 bps higher y/y.
Omni reported $335 million in revenue, a 7.3% increase from the second quarter. (Prior-year results were not provided.) Omni has generated $871 million in revenue through the first three quarters of the year, a little more than half the revenue it was generating when the merger was announced.
Forward improved its liquidity position by $15 million to $460 million as cash flow from operations of $53 million compared to a loss of $45 million in the second quarter.
Net debt was reduced $54 million sequentially to $1.65 billion, 5.4 times adjusted EBITDA. The leverage ratio increased from 5.2 times in the second quarter but remained below the company’s debt covenant of 6 times. Trailing 12 months’ EBITDA of $307 million gives the company a $32 million cushion under its credit agreement.
Management said a new chief commercial officer will join Forward in January. The unnamed person has more than 20 years of service in the global logistics industry.
Shares of FWRD were down 5.1% in after-hours trading on Monday.